Press Release

The Freedom Bank of Virginia Announces Earnings for the Second Quarter of 2018

Company Release - 7/25/2018 2:30 PM ET

FAIRFAX, Va.--(BUSINESS WIRE)--
The Freedom Bank of Virginia (OTCQX: FDVA), (“Freedom Bank”), today
reported net income of $700,231 or $0.10 per diluted share, for the
second quarter of 2018.

Highlights for the Second Quarter:

Net income was $700,231 or $0.10 per diluted share for the second
quarter of 2018, compared to $308,206 for the linked first quarter of
2018, representing an increase of 127.2% in net income on a linked
quarter basis;

Total assets were $512.8 million at June 30, 2018, an increase of $1.6
million or 0.32% from March 31, 2018 and compared to $533.1 million in
total assets on December 31, 2017;

Loans receivable grew by $3.9 million or at an annualized rate of 4%
during the second quarter;

Deposits decreased by $10.2 million during the quarter or 2.3% to
$434.3 million at June 30, 2018, with most of the reduction occurring
in Prime Money Market deposit balances;

Non-Interest expenses increased by 4.9% during the quarter, primarily
due to higher commissions on mortgage loan originations and increased
FDIC assessments, partially offset by a 41.6% reduction in fees for
professional services;

Asset quality remained strong with the ratio of non-performing assets
to total assets at 0.29% as of June 30, 2018, compared to a ratio of
0.13% as of March 31, 2018.

Capital ratios were strong during the second quarter, and above
regulatory minimums for well-capitalized banks, with increases in the
Common Equity Tier 1 Capital ratio, the Tier 1 Capital ratio (based on
risk weighted assets), and the Total Capital ratio, compared to March
31, 2018.

CEO Craig Underhill said, ”Freedom Bank continued with its focus on
growing core deposits during the second quarter. We believe that this
strategy will lead to lower cost, stable funding over time that will
lead to more consistent performance. Additionally, we are pleased with
the growth from our new Chantilly Branch Office during the first half of
2018 – its performance has been consistent with our strategy to develop
strong banking relationships in local markets.”

Total Revenue

Interest income was $5.82 million in the second quarter of 2018 compared
to $5.66 million in the first quarter of 2018, while interest expense
was $1.31 million during the second quarter, flat relative to the first
quarter. Net interest income (before a provision for loan losses) was
$4.50 million in the second quarter of 2018 compared to $4.34 million in
the first quarter of 2018.

Non-interest income in the second quarter was $1.2 million compared to
$680,394 in the prior quarter and total revenue (comprising net interest
income and non-interest income) was $5.67 million during the second
quarter compared to $5.02 million during the prior quarter. Most of the
Bank’s non-interest income is obtained from its mortgage operations.
Additionally, the Bank sold FBV Capital Advisers, its wholly owned
broker-dealer subsidiary during the quarter, for a pretax gain of
$37,952.

Non-interest Expense

Non-interest expense for the second quarter of 2018 was $4.86 million
compared to $4.63 million in the prior quarter. Expenses during the
second quarter were impacted by higher commissions paid to mortgage loan
officers accompanied by an increase in FDIC insurance assessments,
partially offset by a decline in fees paid for professional services.

Asset Quality

Asset quality continues to be strong: there was only one loan on
non-accrual with a balance of $20,007 as of June 30, 2018, compared to
$557,347 or 0.14% of loans receivable as of March 31, 2018. The loan on
non-accrual as of June 30, 2018 was also a troubled debt restructuring
(“TDR”). As of March 31, 2018, TDR balances were $97,895 or 0.02% of
loans receivable. On June 30, 2018, $299,964 of loan balances were 90
days or more past due and not on non-accrual, representing 0.07% of
loans receivable. On March 31, 2018, there were no loans that were more
than 90 days past due that were not on non-accrual on the balance sheet.
Additionally, other real estate owned (“OREO”) on the balance sheet was
$1,167,785 as of June 30, 2018 compared to no OREO on the balance sheet
on March 31, 2018. Total non-performing assets (defined as the sum of
loans on non-accrual, loans greater than 90 days past due and not on
non-accrual, loans that were TDRs but not on non-accrual, and OREO
assets) were $1.5 million or 0.29% of total assets as of June 30, 2018,
compared to $655,242 or 0.13% of total assets at March 31, 2018.

The Bank’s allowance for loan and lease losses (“ALLL”) was $4.36
million or 1.09% of loans receivable at June 30, 2018, compared to $4.51
million or 1.14% of loans receivable at March 31, 2018 and $4.56 million
or 1.12% of loans receivable as of December 31, 2017.

Total Assets

Total assets at June 30, 2018 were March 31, 2018 were $512.8 million
compared to $511.2 million on March 31, 2018, an increase of $1.6
million during the linked quarter, and $533.1 million on December 31,
2017. Changes in major asset categories during linked quarters were as
follows:

Cash and due from banks, Federal Funds sold and interest bearing
balances with other banks decreased by $11.4 million compared to March
31, 2018 as the bank funded loan growth and the balance sheet saw runoff
in high cost money market deposits, while available-for-sale securities
balances increased by $1.29 million compared to March 31, 2018.
Additionally, loans receivable increased by $3.9 million during the
quarter.

Total Liabilities

Total liabilities at June 30, 2018 were $456.1 million, flat compared to
March 31, 2018, with total liabilities of $477.8 million on December 31,
2017. Deposits were $434.3 million on June 30, 2018, lower by $10.2
million during the linked quarter, and compared to $465.9 million in
deposits on December 31, 2017. On a linked quarter basis, non-interest
bearing demand deposits increased by $4.0 million, and money market
deposits declined by $14 million, while time deposits were unchanged.
The reduction in high cost money market deposits indexed to the Prime
rate was largely attributable to the bank’s decision to emphasize core
deposits and reduce interest rate sensitive liabilities, against the
backdrop of a flattening yield curve. Consistent with that strategy, the
bank added $9 million of term advances from the Federal Home Loan Bank
during the second quarter, which lengthened the duration of liabilities.

Stockholders’ Equity and Capital

Stockholders’ equity at June 30, 2018 was $56.7 million compared to
$54.8 million at March 31, 2018, an increase of $1.9 million during the
second quarter, and compared to stockholders equity of $55.3 million on
December 31, 2017. Additional paid in capital at March 31, 2018 was
$54.6 million compared to $53.3 million at March 31, 2018, representing
an increase of $1.36 million during the quarter, and compared to
additional paid in capital of $53.2 million on December 31, 2017.
Retained earnings increased by $700,139 during the second quarter. The
book value of the Bank’s common stock at June 30, 2018 was $8.44 per
share compared to $8.40 per share on March 31, 2018.

As of March 31, 2018, all of the Bank’s capital ratios were well above
regulatory minimum capital ratios for well capitalized banks. The Bank’s
capital ratios on June 30, 2018 and March 31, 2018 were as follows:

June 30, 2018

March 31, 2018

Total Capital Ratio

15.09%

14.99%

Tier 1 Capital Ratio

14.03%

13.87%

Common Equity

Tier 1 Capital Ratio

14.03%

13.87%

Leverage Ratio

11.37%

10.64%

About Freedom Bank

Freedom Bank is a community-oriented bank with locations in Fairfax,
Reston, Chantilly and Vienna, Virginia. Freedom Bank also has a mortgage
division headquartered in Chantilly. For information about Freedom
Bank’s deposit and loan services, visit the Bank’s website at www.freedombankva.com. This
release contains forward-looking statements, including our expectations
with respect to future events that are subject to various risks and
uncertainties. Factors that could cause actual results to differ
materially from management's projections, forecasts, estimates and
expectations include: fluctuation in market rates of interest and loan
and deposit pricing, adverse changes in the overall national economy as
well as adverse economic conditions in our specific market areas,
maintenance and development of well-established and valued client
relationships and referral source relationships, and acquisition or loss
of key production personnel. Other risks that can affect the Bank are
detailed from time to time in our quarterly and annual reports filed
with the Federal Financial Institutions Examination Council. We caution
readers that the list of factors above is not exclusive. The
forward-looking statements are made as of the date of this release, and
we may not undertake steps to update the forward-looking statements to
reflect the impact of any circumstances or events that arise after the
date the forward-looking statements are made. In addition, our past
results of operations are not necessarily indicative of future
performance.

THE FREEDOM BANK OF VIRGINIA

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Audited)

June 30,

March 31,

December 31,

2018

2018

2017

ASSETS

Cash and Due from Banks

$

1,783,930

$

1,200,020

$

1,164,368

Interest Bearing Deposits with Banks

17,058,343

29,053,211

33,936,870

Federal Funds Sold

-

-

127,000

Securities Available-for-Sale

60,356,566

59,067,895

61,989,669

Securities Held-to-Maturity

14,490,551

14,529,382

14,869,181

Restricted Stock Investments

2,966,150

2,533,500

2,533,500

Loans Held for Sale

10,531,335

5,045,282

7,772,501

Loans Receivable

400,423,774

396,454,473

407,332,772

Allowance for Loan Losses

(4,361,544

)

(4,507,545

)

(4,562,370

)

Net Loans

396,062,230

391,946,928

402,770,402

Bank Premises and Equipment, net

1,834,378

1,806,182

1,595,575

Other Real Estate Owned

1,167,785

-

-

Accrued Interest Receivable

1,640,137

1,533,355

1,643,427

Deferred Tax Asset

822,110

822,110

974,614

Bank-Owned Life Insurance

2,365,268

2,351,683

2,338,146

Other Assets

1,751,110

1,302,340

1,407,079

Total Assets

$

512,829,893

$

511,191,888

$

533,122,332

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities

Deposits

Demand deposits

Non-interest bearing

$

73,154,395

$

69,129,363

$

69,942,247

Interest bearing

170,252,331

184,246,985

184,271,412

Savings deposits

2,211,929

2,269,649

2,273,760

Time deposits

188,684,911

188,825,421

209,493,201

Total Deposits

434,303,566

444,471,418

465,980,620

Federal Home Loan Bank advances

19,285,714

10,285,714

10,428,571

Other accrued expenses

2,289,975

1,432,216

1,256,202

Accrued interest payable

207,494

166,118

162,749

Total Liabilities

456,086,749

456,355,466

477,828,142

Stockholders' Equity

Preferred stock, $0.01 par value, 5,000,000 shares authorized;

0 shares issued and outstanding, 2018 and 2017

-

-

-

Common stock, $0.01 par value, 25,000,000 shares:

23,000,000 shares voting and 2,000,000 shares non-voting.

Voting Common Stock:

6,059,501, 5,866,765 and 5,866,765 shares issued and outstanding
at June 30, 2018,March 31, 2018 and December 31, 2017 respectively

60,595

58,668

58,668

Non-Voting Common Stock:

660,143 shares issued and outstanding at June 30, 2018, March 31,
2018, and December 31, 2017 respectively

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